The possibility that a negative event (such as a loss) will happen.

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133 views

Markowitz portfolio optimization question

I am studying the Markowitz portfolio optimization theory, and I just wanted to ask if I understood this correctly. For a stock portfolio we distinguish two kinds of risks: an unsystematic risk, which ...
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3answers
231 views

New ways of communicating risk

One of the scapegoats of the financial crisis was value at risk. Still communicating risks effectively to clients is a big challenge and hugely important (also to keep your job as a quant!) In this ...
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1answer
176 views

Difference between Risk avoidance and Risk transfer

I was hoping some could explain the two terms namely, risk avoidance and risk transfer. Also, can a risk be avoided by transferring it?
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62 views

Why normalize only data for CDSs for PCA?

I'm reading a Credit Suisse Research Report on PCA. The report says that to preprocess the data, you should "Centre data (and normalize when considering CDS data)." Why would you only normalize ...
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104 views

How to use the asset covariance matrix for risk analysis in excess returns equation

New here and I have a question that may be very basic but despite my research I cannot connect the dots. I would like to know how to connect the nxn asset covariance matrix for an efficient tangency ...
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22 views

How discount TVaR of a put option?

Let say I want to calculate the TVaR of a put option. After I simulated possible outcomes in real-world, how do I discount the outcomes? Is there a difference if I am hedged or not? I tried to use ...
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181 views

Semi-variance/Downside Risk, what about the rest of the covariance matrix?

I just bumped into a rather interesting article from wikipedia : http://en.wikipedia.org/wiki/Downside_risk where they define the semi-variance also called Downside risk, which bascially only ...
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397 views

Portfolio optimzation : efficient frontier with respect to risk aversion parameter with R

I am currently trying to write a little script in R to determine the optimal weights given a fixed risk aversion parameter. The problem I have is that by increasing the risk aversion parameter I think ...
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86 views

What are good online resources for credit portfolio managers?

I am aware that this question is not the typical quant.SE question, BUT I couldn`t find any site/forum/wiki, where credit portfolio managers hang out to share their experience and their methods. ...
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100 views

What are the different Credit Portfolio Management models and what are their advantages?

CreditMetrics, RiskMetrics(Algorithims), etc. are all different risk methodologies used by many banks. However, what are their advantages/disadvantages? I would appreciate your replies!
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118 views

What is the difference between these two Expected Shortfall definitions?

I have come across different ways expected shortfall is defined. e.g. $$ES_a(X)=\frac{1}{1-a}\int_a^1VaR_b(X)db$$ and $$ES_a(X)=\frac{1}{a}\int_0^aVaR_b(X)db$$ e.g. on Wikipedia's article. Are these ...
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129 views

What are recent important papers on credit portfolio risk modeling?

I'm interested in papers which consider mathematical models of risks of different portfolios of retail credit. This is not my area of research, so I may be misusing some terms. The idea is simple: I ...
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175 views

Convert a call spread to a butterfly to mitigate risk

I do not have a source for this (apologies), but sometimes, I hear about option traders initiating a vertical spread(short) and then converting that call spread to a butterfly spread to mitigate risk. ...